Broadband Telecommunications Benchmarking Study November 2004
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Broadband Telecommunications Benchmarking Study November 2004 Table of Contents Page Executive Summary i 1.0. Background and Introduction 1 2.0. The Benchmarking Methodology 1 3.0. Telecommunications Sector Overview 1 4.0. Overall Benchmark Results 2 5.0. Sector-Specific Broadband Results 4 6.0. Drivers of DSL Rollout and Take-up 8 7.0. Drivers of Fibre Optic Rollout and Take-up 12 8.0. Government’s Broadband Initiative and International Fibre Developments 13 9.0. Demand for Broadband 14 Appendices Appendix 1: Typical Business Use of Broadband Glossary of Terms Used Appendix 2: Price and Quality Competitiveness of Telecommunications Services Appendix 3: Summary of Broadband Access Technologies Appendix 4: Rollout of DSL in Ireland Appendix 5: DSL Growth Path Appendix 6: Glossary of Terms Used Broadband Benchmarking Study Fifth Update Report Executive Summary I. Introduction The Forfás Telecommunications Benchmarking process assesses Ireland’s competitiveness relative to 21 countries1 with a particular focus on the broadband2 telecommunications requirements of the enterprise sector. The principal objectives of the benchmarking process are to: • determine best practice in the provision of broadband telecommunications in competitor countries, • determine and analyse gaps between the provision of broadband telecommunications and tariffs for enterprises based in Ireland relative to other countries: and, • to form an agenda for action to improve Ireland’s competitiveness. This report assesses developments since the last update report in November 2003 (published in January 2004) and builds on key policy recommendations. Appendix 6 provides a glossary of the technical terms used in the report. II. Key Metrics Figure 1: International Leased Line Costs3 1. International Connectivity OECD International Leased Line Basket (EU15) - Aug 04 Ireland has significant international capacity available to support current and future 1400000 al 1200000 enterprise activity, and is served by a variety t Ireland n of routes and carriers (e.g., Eircom, EsatBT, 1000000 Re /PPP) al NTL, Global Crossing, Cable & Wireless, $ u S 800000 n Hibernia Atlantic etc.). U ( 600000 An ge r a age 400000 High levels of capacity and diversity in terms r Ch of carriers and landing areas has resulted in Ave 200000 ) ) ) ) ) 0 ) ) ) strong competition and very competitive ) e 4 8 3 1 7 0 6 2 1) 9 g ( ( ( ( 1 ( ( 1 ( a s y d ( g r k ( ( l e r m d e ce c n al ar n v an iu prices. n e Ita ou ai a a e l el lg b ug p r r t nm I e Fr e S m Gr e B h e EU A t D Por x Ne As can be seen in Figure 1, Ireland currently Lu offers the lowest international leased line costs M1020 64 k 2 M in the OECD. Figure 2: National Leased Lines Cost 2. Regional Connectivity OECD National Leased Line Basket (EU15) - August '04 Ireland also has an extensive national fibre 4000000 Ireland al 3500000 10 network with a range of players (e.g., eircom, t n e 3000000 PP) 5 R EsatBT, ESB, Aurora, Cable and Wireless, /P al $ 2500000 u etc). S n U n 2000000 ( A ge 1500000 r ge a As can be seen in Figure 2, national leased a h r 1000000 e line costs compare well with the rest of the C Av 500000 OECD. Ireland currently lies in 3rd position, ) ) ) ) 0 ) ) ) ) 6 3) 4 3 9 2 7 ( 1 (5 10) ( 11) (8 ( 14) 12) age s y ( g ( r k ( a ( e ( m three places ahead of the EU average. d y n e ri n ( K t ar n a v and ( iu al s gal our t U a eec I l el lg u u b pai A r r rm t ance ( I e r r A S e U m G enm o B F her e E t G D P e N Lux M1020 64 k 2 M 1 The 21 countries are the EU-15, Canada, Japan, Korea, Hungary, the Czech Republic and the US. 2 The two key broadband technologies benchmarked are leased lines and Digital Subscriber Line (xDSL) technology which allows the provision of high speed services over the copper lines into businesses and homes. See Appendix 6 for a detailed glossary of technical terms used. 3 Figures I and II are sourced from ComReg. Figures in brackets indicate position as of June 2004. i Broadband Benchmarking Study Fifth Update Report 3. Overall Broadband Take-Up Figure 3: Overall Broadband Take-Up Greece Czech Republic Hungary Ireland Lux. Germany UK Spain Portugal Austria DSL Italy Cable Finland FTTH France US Belgium Sw eden Japan Canada Netherlands Denmark Korea 0% 5% 10% 15% 20% 25% 30% Note: FTTH – Fibre to the Home • Ireland has experienced rapid DSL growth since the last update report in November 2003 with DSL take- up by population rising to over 2% (see Figure 3), which equates to 90,000 broadband connections4 (compared to 15,700 in November 2003). • Ireland has also improved in terms of DSL coverage and it is estimated that coverage5 has increased to 81%. However, there are issues with line failures which operators plan to address in 2005. • In terms of prices, the cost of basic DSL services have dramatically improved and Ireland is now amongst the most competitive countries for residential and small business customers. However, other countries are in a position to offer a greater quality and choice of services, due to the level of competition. • Business broadband continues to grow with an estimated 30% of SMEs in Ireland now with a broadband connection. Despite these developments: • Ireland continues to compare poorly for overall take-up of broadband (DSL, Cable, Fibre to the Home) as illustrated in Figure 3. Since the last update report in November 2003, Ireland has slipped further behind both the average and leading countries within the comparator group. • Norcontel6 estimate that compared to the average countries in the group (with 11% broadband take-up), Ireland currently has a broadband deficit of 360,000 connections. In order to catch up by 2007, Ireland needs to install this deficit plus the additional growth other countries are expected to experience during that period, equivalent to another 370,000 lines, bringing the total to over 700,000 connections. 4 This number is likely to exceed 100,000 by the end of 2004. 5 Coverage data refers to the total number of lines that are DSL enabled. 6 Forfás have commissioned Norcontel, a specialist telecommunications consultancy, to benchmark Ireland’s broadband telecommunications infrastructure, service availability, tariffs, and the telecommunications regulatory environment with competitor and leading countries. ii Broadband Benchmarking Study Fifth Update Report The key reasons for Ireland’s slippage and poor relative performance in relation to overall broadband take-up is: 1. The lack of real growth in competing technologies, especially cable, which is very strong in other countries; 2. The lack of competition and innovation within the DSL market. A number of recommendations are developed below aimed at addressing these issues. III. Priority Recommendations 1. Lack of Inter-Platform Competition Incumbent telecommunications operators in all countries were originally reluctant to rollout DSL as it undercut the price of their current business services (e.g. ISDN, leased lines, and other premium services). The impetus which forced many of them to invest was serious competition from cable TV companies. Despite the large penetration of cable TV in Ireland, to date, the network operators haven’t had the level of funding required to meet the high costs of upgrading their networks to provide widespread broadband services. Delivering broadband over wireless or radio is currently attracting a lot of attention in Ireland and it is becoming increasingly important to consider mechanisms to stimulate the development of alternative emerging technologies. It is recommended that: • The Department of Communications, Marine and Natural Resources work with the Local Authorities and the Department of Environment, Heritage and Local Government to reduce the high charges involved in rolling out infrastructure by cable and telecoms operators; • ComReg review broadband spectrum usage with the objective of encouraging operators to maximise the use of spectrum resources when delivering broadband services. For example, ComReg should consider freeing up spectrum for WiMax technologies in order to increase the range and penetration of wireless services enabling them to be more competitive with DSL; • The Department of Communications, Marine and Natural Resources should update the Wireless Telegraphy Act (1926) as a matter of urgency to ensure regulatory certainty that allows for innovative access to spectrum and provides financial institutions with greater surety with regard to investing in companies in the wireless space. 2. Lack of Competition and Innovation within the DSL Market In Ireland, it is increasingly likely that DSL will be the key platform for the delivery of broadband services to residential and SMEs in the medium term, unlike many other countries where there is strong competition between cable and DSL, and within the DSL market. Both local loop unbundling (LLU) and DSL resale provides telecommunications service providers the opportunity to offer broadband to the enterprise sector by using the incumbent’s network and thus boost competition in the DSL market. In Ireland, both options have had limited success to date and issues remain over (a) the cost of LLU and (b) the availability of collocation space: (a) ComReg has recently indicated that the rental price for a local loop would be reduced. However, Ireland will remain among the highest in Europe for unbundled line prices and these high prices will continue to curtail innovation in broadband. Since May 2004, BT in the UK have reduced the rental cost by nearly 50% and the installation cost by nearly 70%, resulting in a monthly amortised cost of €7.86.